There are many reasons why people find themselves at the point where they feel bankruptcy is their only option. In some cases, they simply cannot pay their bills and are using what little, if any, credit they have to pay for basic means. Perhaps they’ve lost their job and either didn’t have or have already gone through their savings. Or, unexpected large medical bills could be part of the culprit.
But regardless of why someone may be filing for bankruptcy, the end result and goal is always the same: to clear away debt that they cannot pay off otherwise. Learn how to file for bankruptcy with our step-by-step guide. However, before we examine the procedure for filing for bankruptcy in Canada, we explore some crucial advantages of the bankruptcy process below.
Benefits of the Bankruptcy Process
If you are thinking about filing for bankruptcy, it is important to understand what the benefits are. After you file, you will need to obey the rules that are set for you. If you follow the rules and complete your bankruptcy, then you can expect the following benefits:
Most unsecured debt will be eliminated.
If you successfully complete bankruptcy, you will be free of most unsecured debts. There are a few exceptions, such as child support, penalties, court fines, and student loans that were taken out in the last 7 years.
Your interest and payments will stop.
So you don’t have to worry about interest being added to your debt month after month, or having to pay this interest.
Collections will cease.
People who have debt often feel stressed or lose sleep because of the calls and letters from creditors. But after they file for bankruptcy, something called an “automatic stay” will go into effect. This makes it so that creditors can’t contact the person anymore in order to get payment. This is one of the biggest benefits of filing for bankruptcy, and it means that people don’t have to worry about any more harassing phone calls or letters from creditors, or lawsuits or other legal claims.
Wages will no longer be garnished.
If you file for bankruptcy, it will stop all wage garnishments. This includes wage garnishments from the Family Responsibility Office. The Trustee will send a notice to the creditor, employer, and the court informing them that wage garnishments must stop.
You will have a fresh start, free from the financial burden of debt.
Filing for bankruptcy can give you peace of mind because your debt problems will be over but make sure you know the over the effects of bankruptcy. Your credit score report will show that you filed for bankruptcy after a while. You will be able to enjoy a clean credit score after a set target date. Bankruptcy offers suffering debtors the chance to start fresh and make good decisions in the future.
It can be a less expensive option.
In comparison to other options, like getting a debt consolidation loan or using a debt consolidation program.Ask us about a consumer proposal
Steps to Filing for Bankruptcy in Canada
There are six simple steps to declaring bankruptcy in Canada. However, it is important to remember that declaring bankruptcy is a lengthy and in-depth process. Knowing what to expect can help reduce the stress and fear associated with the process. For more information, keep reading to learn how to declare bankruptcy in Canada.
Understand Your Debt Situation
First, you should recognize that you are having financial problems and that you don’t think you can solve them on your own.
There are different signs that may mean you have money problems. You should take action if you see any of these signs:
- You have not paid one or more of your mortgage or loan payments.
- You are using up all of your credit.
- You are borrowing money from a credit card company.
- You have been contacted by collection agencies because your creditors have asked them to collect the money you owe.
- You have been notified that you may be sued in order to collect the money you owe.
If you are feeling a lot of pressure from your debt, the first step is to make a commitment to explore your debt relief options.
Find a Licensed Insolvency Trustee to help you understand Canada’s debt regulations
Only Licensed Insolvency Trustees are licensed by the Canadian Superintendent of Bankruptcy to help people with consumer proposals and bankruptcies. This means that in order to declare bankruptcy or file a consumer proposal you must work with a Licensed Insolvency Trustee.
Your trustee will provide you with information about all your options, including consumer proposals, the process for filing for bankruptcy, and other debt relief options. They will also ensure that your rights are protected during the bankruptcy or proposal process.
When selecting your trustee, you should consider the following:
- You should choose a trustee who lives close by or is easy to get in touch with.
- You should be comfortable with your trustee. Ask them questions about your situation and make sure you understand their answers.
- Confirm that they are licensed by the Superintendent of Bankruptcy.
Here on Risman Zysman Inc., you can find a Licensed Insolvency Trustee who is local to you. We only list Trustees who have a long history of helping people find debt relief.
You should meet with your trustee to discuss your options
After you choose a trustee, you should contact them and set up a free initial consultation. At this meeting, the trustee will ask for some specific details about your financial situation, including your income and expenses, assets and debts. The trustee will then explain the different alternatives to bankruptcy that might be available to you, such as debt consolidation or consumer proposals. You will have as much time as you need to make a decision about which option is best for you.
Filing For Bankruptcy
If you and your trustee choose to file for bankruptcy, your trustee will give you a form to fill out. In order to file the bankruptcy paperwork, your trustee will need:
- Your personal information
- A list of your creditors
- A list of your assets
After your trustee has your information, they will prepare the initial paperwork. This paperwork will include an explanation of the bankruptcy process. Review this information with your trustee and make sure you understand it. Once you are ready, sign the papers and your bankruptcy begins.
When you file for bankruptcy, an immediate ‘stay of proceedings’ happens. This means that unsecured creditors cannot start or continue lawsuits, wage garnishees, or contact you to request payment.
Within five days of the bankruptcy starting the trustee will send a copy of the paperwork to creditors, so they can file a claim.
The trustee will file outstanding tax returns up to the date of bankruptcy. Any taxes or penalties owed CRA will be included.
You will have certain obligations that you will have to fulfill including a monthly income statement and attending credit counselling sessions.
One of the most common questions about how to declare bankruptcy in Canada is what the duties of the person filing the case are. The goal is to erase the debts that can’t be paid, but during the case, the debtor is expected to:
- Surrender assets – If you own something that is worth more than what you owe on it, you may have to give it to the person in charge of your bankruptcy case. This is just one reason why it’s a good idea to talk to a licensed insolvency trustee before deciding if bankruptcy is the right choice for you.
- Surrender you credit cards – People who are interested in declaring bankruptcy in Canada need to understand that they will not be able to get more debt while they are trying to clear their existing debts. When someone files for bankruptcy, they have to give all of their credit cards to the trustee.
- Attend credit counselling sessions – You must attend one credit counselling session within 90 days of filing your bankruptcy case. You must also complete a second session before you are discharged from bankruptcy. The goal of these counselling sessions is to help you avoid making choices that got you into this situation in the first place.
- Provide monthly income statements – If you want to file for bankruptcy in Canada, you have to provide the trustee with monthly statements that show your income and basic bills. You also need to provide all of the information necessary to complete those returns.
- Make your payments – In most cases, the debtor will have to pay some money each month to the bankruptcy estate. The fees for the trustee are set by the government.
Almost all of your debts will be cancelled after you file for bankruptcy. There are a few exceptions, but most people’s debts will be forgiven. The note about your bankruptcy will stay on your credit report for six years, but this is nothing to worry about. In nine months, your bankruptcy will be discharged and you can start rebuilding your credit. Your trustee can help you do this by giving you advice on how to get your credit score back up and by helping you manage your money.
Deciding to declare bankruptcy is not an easy decision to make, but it can be a viable solution to clear debt depending on the financial circumstances. When you declare bankruptcy, all of your eligible debts become legally binding contracts that must be repaid. Bankruptcy can help you get a fresh start by relieving you of your debt burden, but it’s essential to understand how bankruptcies work in Ontario before making any decisions.
Ideally, nobody ever plans on filing for bankruptcy, but sometimes it is the only option left. If you consider claiming bankruptcies in Canada, knowing the process and what to expect is important.
Bankruptcy is a legal process that gives opportunities to individuals to reorganize or restructure their finances and eliminate their debt. This process is overseen by a bankruptcy court and generally takes between six months and three years to complete. Bankruptcy can be filed for several reasons, such as personal financial difficulties, business restructuring, or eliminating creditors’ claims.
Individuals who file for bankruptcy protection typically do so because they are unable to repay their debts. When individual files for bankruptcy, all of their assets are taken into account to pay off creditors; if the value of the assets does not cover the amount of debt owed, the court may liquidate some of the debtor’s assets to pay off creditors. Bankruptcy is not a decision that should be taken lightly. It can have severe consequences for your credit rating and future borrowing ability. It is essential to understand the ramifications of bankruptcy before making decisions.
When an individual files for bankruptcy in Canada, it is a legal declaration of insolvency. This means that the individual can no longer repay their debts as they become due. The Bankruptcy and Insolvency Act (BIA) governs the process by which individuals can file for bankruptcy and how it must be administered.
The process of bankruptcy should always be managed by a Licensed Insolvency Trustee. The bankrupt’s assets are sold, and the proceeds are used to repay creditors. The debtor is discharged from bankruptcy once all debts are repaid.
- What happens to your assets?
In Canada, when you declare bankruptcy, your assets are divided into two categories: exempt and non-exempt.
Exempt assets are protected from being seized by creditors and include items such as your home, car, furniture, clothing, and tools of the trade. Non-exempt assets are not protected and can possibly be seized by creditors to be used to pay off your debts.
The most common types of exempt assets comprise:
Ø Personal effects (e.g., clothing, furniture, appliances)
Ø Household goods (e.g., dishes, pots, and pans)
Ø Tools of the trade (e.g., tools used for your job)
Ø Vehicles up to a particular value
Ø RRSPs and other registered retirement savings plans
The most common types of non-exempt assets comprise:
Ø Investments (e.g., stocks, bonds, GICs)
Ø Property (e.g., real estate, cars)
Ø Business assets
Ø Unpaid wages
During bankruptcy proceedings, an appointed Licensed trustee will review your financial condition and determine which assets can be used to repay your creditors. Our licensed Insolvency trustees at Risman Zysman make sure that you retain possession of most of your assets and only consider selling them if necessary. You can keep a certain amount of assets (called exemptions) to live on. The exact amount depends on the province or territory in which you reside.
- What Happens to your Debts?
Majority of your unsecured debts are forgiven when you claim bankruptcies in Canada. This includes credit card debts, lines of credit, and personal loans. Secured debts (e.g., car loans, mortgages) are not forgiven and must be repaid. Student loans are a case; they are considered unsecured debts if you’ve been out of school for seven years.
Creditors cannot take legal action against you to collect your debts after filing for bankruptcy. This includes wage garnishment, legal action, and seizure of assets. Although, there are a few exceptions to this rule. For instance, creditors can continue to pursue you for repayment of child support and alimony payments. Additionally, if you have obtained money through fraud or misrepresentation, the court may order that the debt be repaid even after being discharged from bankruptcy.
Although declaring bankruptcy will relieve you of most of your debt obligations, it is important to remember that there are better debt relief options available as well that should be considered. Bankruptcy can potentially impact your credit score and your ability to obtain credit in the future.
- What Happens To Your Income?
When you declare bankruptcy in Canada, your income will be affected in a few different ways. First of all, any money that you owe to your creditors will be frozen. This means that you will not be able to access it or use it to pay your bills. Secondly, your tax returns for the previous year will be applied to your bankruptcy estate. This can impact your current income and make it more challenging to make ends meet. Finally, your credit score will be significantly affected by bankruptcy. Thus, making it difficult to get loans or lines of credit in the future.
While declaring bankruptcy can have some short-term effects on your income, it is often the best solution for individuals struggling with debt. It provides you with a fresh start and allows you to rebuild your credit score over time.
- How Is Credit Score Impacted After Bankruptcy
Declaring bankruptcy will have a significant impact on your credit score in Canada. That’s because bankruptcy is considered a significant financial setback, and it will stay on your credit report for up to seven years. Bankruptcy can make it challenging to obtain new credit during that time. In addition, missed repayments or collector calls related to your bankruptcy can also impact your score.
The bright side is that your credit file is clean again once the bankruptcy is discharged, and you can initiate rebuilding your credit rating. There are some options available to help you do this, such as secured credit cards and lines of credit. At Risman Zysman, you can work with our credit counseling service to develop a plan to improve your credit rating.
The decision of when to file for bankruptcy will depend on various factors specific to each case. However, some signs that it may be time to consider bankruptcy filing include struggling to make ends meet despite making significant financial sacrifices if creditors are harassing you or facing legal action due to your inability to repay debts.
If you are considering a bankruptcy filing, it is crucial to speak with an experienced licensed insolvency trustee who can help guide you through the process and advise you on the best course of action for your specific situation. Our Licensed Insolvency Trustees at Risman Zysman can help you understand your options and develop a plan to get out of debt. We can also assist you in improving your financial situation and avoiding future debt problems.
A trustee is an individual or institution responsible for holding and managing assets on behalf of another person or entity. In bankruptcy, the court-appointed a trustee to oversee the process and administer the bankrupt estate. The trustee’s role is to collect and realize assets, make distributions to creditors, and perform other duties as prescribed by the bankruptcy code and assigned by the court.
When a debtor files for bankruptcy, they must list all of their creditors in their bankruptcy schedules. The Insolvency trustee’s job is to review the schedules and records, meet with the debtor (the person who filed for bankruptcy), manage the bankrupt estate’s assets, and distribute funds to creditors following the bankruptcy code. The trustee is also responsible for ensuring that the debtor complies with the bankruptcy order terms.
Evaluate All Debt Relief Options
Knowing where to turn for help when struggling with debt can be challenging. Here’s an overview of the most common debt relief options available in Canada to decide which one is right for you.
- Bankruptcy is a legal process that allows you to declare insolvency and have your debts forgiven. Bankruptcy is a good option if you have no assets and no income or if your assets are worth less than your debts. It is the last resort for people who can’t afford to pay their debts, and it comes with significant consequences, including a negative impact on your credit score.
- Debt consolidation is a process that merges all of your debts into one loan, which you then use to pay off your creditors. Debt consolidation typically has lower interest rates and longer terms than credit cards, so it can be a helpful way to manage your debt. It can be a good option if you have high-interest rates on your debts or struggling to keep up with multiple payments each month.
- Debt settlement is a process where you negotiate with your creditors to pay off a portion of your debt. It is typically used as a last resort when you can’t afford to pay your debts. Debt settlement can be helpful if you have a significant amount of debt and struggle to make payments. However, it can also damage your credit score, and it’s important to be aware of the risks involved.
- A consumer proposal is a formal way to deal with your debts when you can’t afford to pay them. An agreement between you and your creditors allows you to pay off a particular portion of your debt over a while. Consumer proposals have lower interest rates and shorter terms than bankruptcy, so they can be a helpful way to manage your debt.
Our team of licensed insolvency trustees at Risman Zysman Inc. can help you evaluate all of your debt-relief options, including consumer proposals and personal bankruptcy. We will work with you to determine the best choice for your unique financial situation. We can also negotiate with your creditors on your behalf and represent you in court if necessary.
How Can We Help
It can be hard to know where to turn when struggling with debt. Many options are available, but not all of them are right for everyone. At Risman Zysman Inc., we can help you make an informed decision about your financial status. We can help deal with all types of debts, including loans and line of credit debts, payday loans, credit card debts, tax debts, collection calls, and wage/bank account garnishment.
You can be DEBT FREE with Risman Zysman Inc in your corner! We are a licensed Insolvency Trustee in Canada and are authorized by the government to claim bankruptcy and consumer proposals. We have over 45 years of experience helping people get out of debt, and we’re here to help you.
Contact us today for a free consultation, and let us help you with your debt management.